Commission Calculator
Tiered plans have a marginal rate and an effective rate, and they are rarely the same number. Knowing which one applies to your <em>next</em> sale is the difference between chasing the right deal and the wrong one.
Your Plan
For a flat plan, use a single tier starting at 0.
What another sale is worth
Marginal and blended rates are different numbers
On a tiered plan, each band of sales earns its own rate. If the first $100,000 pays 3 per cent and the next band pays 5 per cent, then at $180,000 of sales your marginal rate is 5 per cent but your blended rate is only about 3.9 per cent. Quoting the top-tier rate as “your commission rate” overstates earnings substantially, which is why plans are often presented that way.
Tiered versus cliff structures
This page models a true tiered plan, where each band is paid at its own rate. Some plans use a retroactive cliff instead: hit the threshold and the higher rate applies to everything from dollar one. Cliffs create enormous incentives right at the threshold and can make one extra sale worth thousands. Check which structure your plan actually uses — the wording often does not make it obvious.
Draws, clawbacks and when commission is earned
A recoverable draw is an advance against future commission, not extra pay; if you do not earn it back, it is typically deducted. Clawbacks reverse commission when a customer cancels or fails to pay. Both are common and both change your effective earnings materially, so the number on this page is gross commission before those adjustments.
Frequently Asked Questions
What is the difference between marginal and effective commission rate?
How do tiered commissions work?
What is a recoverable draw?
Does this include tax?
Sources
Official publications only. Links open the original document in a new tab.
- Internal Revenue Service Federal income tax rates and brackets Brackets applied to commission income
- Social Security Administration Contribution and benefit base FICA wage base on total earnings